If you’ve bought a property that needed work doing before you could move in, you may have seen ads claiming you could reclaim some of the Stamp Duty Land Tax (SDLT) you paid if the property was in a poor state of repair.

These offers often sound appealing especially when made on a “no win, no fee” basis. However, a recent Court of Appeal decision has confirmed that homes needing repair still attract residential rates of SDLT.

As a result of the court decision, HM Revenue and Customs is warning homebuyers about rogue tax agents offering to claim SDLT refunds on the basis that a property was “uninhabitable” or “non-residential” at the time of purchase. But in most cases, renovations such as needing a new boiler, rewiring, or even having damp problems does not mean the property counts as non-residential.

What does this mean in practice?

The question to consider is whether the defects to the property have resulted in the building no longer having the characteristics of a dwelling.

That means:

  • Claims based purely on a property needing repair are unlikely to succeed.
  • If the property has previously been used as a dwelling, this will be an important factor.
  • A property doesn’t need to be ready for immediate occupation to be “suitable for use as a dwelling” for SDLT purposes.

What can go wrong?

If a claim is made for repayment for SDLT paid and HMRC later decide that the claim is invalid, it can get expensive.

Interest and penalties will be added to the SDLT due but also, unscrupulous agents may not return the fee that was deducted from the refund.

Now that the Court’s decision has been confirmed, HMRC are actively cracking down on spurious claims and are using both civil and criminal powers to target agents making misleading submissions.

What should you do?

  • Be sceptical of unsolicited offers promising SDLT refunds based on property condition
  • Don’t be rushed into letting a third party file a claim for you – especially if they charge high fees
  • Understand the risk – you, not the agent, are liable if HMRC later challenges the claim

This case serves as a firm reminder that if it looks too good to be true, it probably is. While repairs and renovations are part and parcel of buying older properties, they don’t change the fundamental tax treatment of the home.

If you’re ever unsure about SDLT rules, or whether a refund might apply, please don’t hesitate to give us a call. We would be happy to help you.

See: https://www.gov.uk/government/news/homebuyers-warning-as-hmrc-gets-tough-on-bogus-stamp-duty-claims